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TOWN SAVINGS AND LOAN BANK V. CA 223 SCRA 459 - Accommodation party
TOWN SAVINGS AND LOAN BANK V. CA- Accommodation Party
223 SCRA 459
Spouses Hipolito applied for and was granted a loan by the bank, which was secured by a promissory note. For failure to pay their monthly payments, they were declared in default.
The spouses denied having any liability. They stated that the real party-in-interest is the sister of the husband, Pilarita Reyes. The spouses, not having received part of the loan, were mere guarantors of Reyes. As such, they protested against being dragged into the litigation.
The trial court held that they were liable as accommodation parties to the promissory note. This was reversed by the Court of Appeals.
An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefore and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be an accommodation party. In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He lends his name to enable the
accommodated party to obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate another.
In the case at bar, it is indisputable that the spouses signed the promissory note to enable Reyes to secure a loan from the bank. She was the actual beneficiary of the loan and the spouses accommodated her by signing the